US key numbers set the tone yesterday

Market Movers

• Tonight’s FOMC meeting is unlikely to provide us with much new information. We expect to receive a statement but no updated projections or press conference. Along with consensus, we expect no change in policy at the meeting. We believe the Fed wants to keep all doors open at this point and will try to signal that a December rate hike is an option but by no means a given. The tone on recent economic developments is likely to be more downbeat than in September but global economic and financial developments should have become less of a risk. In our view, the forward-looking part of the statement is likely to be kept broadly unchanged, as the Fed awaits more data before changing its view on the outlook.

• ECB’s Preat and Constanzio speak today. Markets will look for clues on what kind of easing the ECB has in mind.

• Today could turn out to be hectic in Sweden. First, the debt office's (delayed) borrowing forecast (revised for 2016 and the first for 2017) is released at 9.00 CET. Half an hour later the Riksbank announces its policy decision from yesterday's executive board meeting. In Norway it is time for manufacturing confidence, retail sales and labour market numbers.

Selected Market News

US key numbers set the tone yesterday. Durable goods orders declined 1.2% m/m in September and August order growth was revised down to -3.0% from -2.0%. The headline was dragged down by non-defence aircraft orders, which was -35.7% in September and -11.2% in August. However, even ex aircraft, durable goods orders were down 0.4% m/m in September and 0.9% in August, so still a weak trend but not as bad as the headline. The gauge on business capex, the capital goods orders ex defence and aircraft was -0.3% in September and -1.6% in August after two strong months, which leaves the three-month annualised growth rate unchanged at 6.2% but the trend into Q4 is on the weak side. US consumer confidence was also on the weak side as it fell to 97.6 from a revised 103. Consensus had expected a roughly unchanged reading.

Oil was also high on the agenda yesterday, as Brent oil dropped below USD47 a barrel on expectations that today’s stock data from the Department of Energy will show another build and on fears that the Chinese rate cut earlier this week might reflect a more protracted weakness in the Chinese economy.

The weak numbers together with further comments from ECB members confirming the dovish stance of the ECB made both Bunds and US treasuries rally and the futures market postponed the first Fed rate hike further into 2016 ahead of tonight’s FOMC meeting. Note though, that the market is still pricing roughly a 30% probability of a Fed hike at the December meeting but hardly no probability for a move tonight.

The news weighed on the US equity market and the major indices all ended with small losses although the losses for the European indices were actually higher. Nikkei is also up slightly this morning after Apple published its positive earnings after the US close.

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